As interest rates drop and investors take a closer look at "risky" long-term assets, the wealth management arm of Ayala-led Bank of the Philippine Islands (BPI) anticipates more client investments to achieve 20-percent assets under management (AUM) growth for 2024.

BPI Wealth president and chief executive officer (CEO) Maria Theresa D. Marcial told reporters last Thursday, Oct. 10, that AUM accumulation "has been really strong, and we are very happy with the results" so far this year.

As of end-2023, BPI Wealth's AUM reached a record P1.22 trillion, up 40 percent from P875 billion in end-2022.

It targets AUM to hit the P3-trillion mark by 2026.

"We're quite positive about the prospects. And it's good for clients to actually be investing in risky asset classes, and we're actually seeing net inflows in our investment funds," Marcial said on the sidelines of the launch of the second season of BPI Private Wealth's Signature Yacht Race Series.

Marcial said there are more inflows this year, compared to the "flattish" 2023 and net redemptions due to unfavorable market conditions in 2022.

As early as last year, BPI Wealth has been enjoining its clients to begin investing in risky assets such as longer-duration bonds and equities here and abroad "because we're saying that inflation has peaked and interest rates will go down," Marcial said.

Long-term bonds are deemed good for investment portfolios as adding duration benefits from declining borrowing rates, she noted.

She added that recent "positive" developments like the Bangko Sentral ng Pilipinas' (BSP) monetary easing cycle kick-started in August, the US Federal Reserve's aggressive rate cut last month, as well as the reduction in local banks' reserve requirement ratio (RRR) taking effect this month allow BPI Wealth's clients "to really put more of their investments taking more risk."

For his part, BPI president and CEO Jose Teodoro K. Limcaoco said the RRR cut is "the right step — it's a step in the right direction."

"I've always thought reserve ratio requirements are a thing of the past because it was supposed to be cash in your vault, cash that you keep in the branches (servicing) withdrawals. In the electronic age, you don't really need to hold cash anymore," Limcaoco said.

He noted that while riskier assets should perform better in an environment of falling interest rates, "you've got to look at the risk appetite."

"But that's just basic economics — as interest rates fall, riskier assets tend to be more attractive as people look for yields," he added.

Moving forward, Marcial said there are still more legs for markets to rally, as analysts and fund managers are projecting earnings growth of at least 12 percent, which, in turn, would translate to higher equity valuations.

"Portfolio managers are just beginning to add equity risk, specifically Philippines," she said.